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Spending Enough to Clean Up Pollution?


It should be spending 2 percent of GDP on environmental cleanup, and it's spending less than half of that

Li Pingri remembers the fish and shrimp he saw as a boy in the Chigang creek in Guangzhou. Today, even after the city has spent 48.6 billion yuan ($7.2 billion) on a cleanup of the city's rivers and streams, he can't stand the Chigang's smell. "We are surrounded by black waterways, breathing the foul air every day," says Li, 79, a former researcher at the Guangzhou Institute of Geography. "If we can't breathe clean air or drink clean water, high economic growth is meaningless."

China is pursuing an ambitious plan to build the world's best network of green energy sources and codify the toughest rules on auto emissions. Yet it also should be spending at least 2 percent of gross domestic product annually—or 680 billion yuan—to clean up the industrial waste it has built up over the last three decades, says Ping He, chairman of the Washington-based International Fund for China's Environment.

Right now, China is spending 280 billion yuan a year cleaning up rivers and other toxic sites, according to the Chinese Academy for Environmental Planning. Although that sum may double between 2011 and 2015, it is far smaller than the 4 trillion yuan China spent on economic stimulus in just one year. At stake are billions of yuan in pollution-related losses and expenses. The costs, including diminished productivity due to health issues, crop degradation, and losses from pollution-related accidents, totaled 512 billion yuan in 2004, the latest figure available, according to the Chinese Academy for Environmental Planning, a branch of the government.

Chinese policymakers face a dilemma. If they vigorously pursue a strategy of undoing the effects of previous contamination and enforcing stricter laws against new emissions, they will raise the operating costs for big employers in such dirty yet vital industries as metals smelting; the smaller players will go under. If the government does not ramp up its efforts, it risks considerable damage to the entire economy. In July Fujian-based Zijin Mining Group, China's largest gold producer, had to shut a copper plant and limit production at a gold mine in eastern China's Fujian province after acid-laced waste spilled into a local river, killing enough fish to feed 72,000 people for a year.

Ordinary Chinese, like Li Pingri, are getting fed up. "If China doesn't address the environmental issues when the economy is growing fast, it might become a destabilizing factor in society," says Ma Jun, founder of the Institute of Public Environmental Affairs in Beijing.

Hundreds of villagers in Fengxiang county, Shaanxi Province, tore down the fence around Dongling Lead and Zinc Smelting in August last year and vandalized equipment after government officials blamed the plant for giving more than 600 children lead poisoning, state news agency Xinhua reported. "Environmental protests have been one of the leading sources of social unrest," says Elizabeth Economy, director for Asia Studies at the New York-based Council on Foreign Relations and author of The River Runs Black, a book on China's environmental woes. Protesters now communicate with one another via blogs and Twitter accounts devoted to green issues. Up to 10,000 people in Xiamen, Zhangzhou, and Chengdu have fought the planned siting of large-scale chemical plants, and in some cases forced the government to reverse a decision, Economy told the U.S. Congressional-Executive Commission on China in October 2009.

In August, Vice-Chairwoman Chen Zhili of the National People's Congress said the government had done a poor job of using incentives and special funding to persuade factory owners to adopt cleaner production methods. She called for preferential tax rates for companies using cleaner production methods, according to a report from Xinhua.

Chinese Premier Wen Jiabao said at the World Economic Forum's meeting in Tianjin in September that China will cooperate on global efforts to reduce carbon emissions and maintain its efforts on environmental protection. Earlier efforts, such as Beijing's push to clean the capital city's air for the 2008 Olympic Games, haven't been sustained, says Jing Cao, who teaches environmental and resource economics at Tsinghua University's School of Economics and Management in Beijing. Removing polluting factories and limiting the number of vehicles on Beijing's roads "had a visible improvement on the overall environment," he says. "Two years on, however, we see the pollution gradually coming back as car ownership grows exponentially."

At the end of 2008, when Guangzhou pledged to spend billions on a cleanup before the city hosts the 2010 Asian Games in November, the mayor promised that all district head officials would be able to swim in the Pearl River, into which the Chigang flows, after a year. In June 2010, Li Pingri wrote to the mayor pointing out that the water of the Chigang, which runs in front of his apartment, was as bad as ever. Says Li: "It's too ambitious to think that all the pollution accumulated over the decades can be cleaned up in a year and a half."

The bottom line: Analysts say that China needs to spend hundreds of billions more on cleaning up polluted sites around the country.

Sim is a reporter for Bloomberg News. Rong is a reporter for Bloomberg News.

Steve Ballmer, Power Forward
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